FTSE100 - Possible bullish Cypher set up if BOE disappoints

Let us consider the possible Cypher set up on the daily chart . We are considering a drop from the current level to point D stationed at 5756 levels (Point D is 78.6% of XA leg).

At the current juncture such a move appears likely if there is a sharp recovery in the GBP/USD . That in turn appears likely if the Bank of England disappoints markets.

Markets expect BOE to cut rates this week or in August. Carney has expressly stated that rates could be cut or QE could be restarted this summer if the situation warrants. But will the BOE to do so? The question has been raised by one of the experts (from ForexLive) on our show today.

The rationale is that whatever data we have have post Brexit represented pre-Brexit period. So far, BOE has not had any data that shows post Brexit deterioration in the economic activity. Hence, it makes little sense for the BOE to cut rates this week.

If doesn't we could see a sharp recovery in Pound and that could have a bearing on FTSE100. The first support would be inverse head and shoulder neckline around 6400, which if taken out would open doors for a drop to 6000 and then to point D = 5756. Note, that point D is the potential reversal zone; an area where bulls would make a come back. This goes down well with historical data, which shows area below 6000 has always seen fresh buying.

Related Ideas

As stated in the article above, here is the link to our show where forexlive director talked about whether a BOE rate cut this week would be a premature move - https://www.youtube.com/watch?v=fgzjY6VXtu8

There is another opinion in the market that BOE rate cut may have been priced-in, which means we could be heading southwards on 'buy the rumor, 'sell the fact" trade'. Clem Chambers, Founder of ADVFN was on the our Finance show yesterday - he talked about the possibility the BOE rate cut may have been priced in by the market. The full video could be seen here - BOE rate cut priced-in, politics overshadows economics - ADVFN - https://www.youtube.com/watch?v=Yyg6pZeF8yc